CHINA FACTORY ACTIVITY

China factory activity at 11-month low

Wednesday, March 25, 2015

Activity in China's factory sector dipped to a 11-month low in March as new orders shrank, a private survey showed, signaling persistent weakness in the world's second-largest economy that will likely fuel calls for more policy easing to support growth.
The poor reading added to signs that the economy has lost momentum despite two interest rate cuts since November, a reduction in the amount of money banks must keep in reserve and repeated attempts by the central bank to reduce financing costs.The flash HSBC/Markit Purchasing Managers' Index dipped to 49.2 in March, below the 50-point level that separates growth in activity from contraction on a monthly basis. Economists polled by Reuters had forecast 50.6, slightly weaker than February's final PMI of 50.7. Some analysts expect first- quarter economic growth to dip below the government's new full-year target of 7 percent widely seen as the level needed to keep employment steady. "The weaker PMI data could increase pressure for policy loosening," economists at CICC said. They predicted the central bank would cut lenders' reserve requirement ratios six more times this year, on top of another interest rate cut. JPMorgan said the next RRR cut may come as soon as next month.Asia stocks fell after the PMI report, with the Hang Seng Index dipping 0.4 percent to 24,399.60. But a separate industry survey released by China Beige Book showed that while mainland firms grew even more wary of borrowing and investing in the first quarter, they still managed to defend profit margins thanks to lower input costs for commodities and labor.The PMI survey suggested that manufacturers faced considerable challenges from weaker domestic demand and deflationary risks.The new orders sub-index fell to a 11-month low of 49.3 in March. Strains on the job market continued to rise, with the employment sub-index contracting for a 17th straight month. REUTERS